Corporate Governance and Business Ethics

"It is this distancing of personal relationships, combined with their replacement by written contractual terms and conditions, which make the discussion of ethics within a corporate institutionalised context highly limited and problematic.' The challenge is to find means of personalising modern corporations so as to encourage ethical behaviour. Atul K. Shah PhD (Econ) ACA gained his doctorate from the London School of Economics and is Lecturer in the Department of Accounting and Financial Management, at the University of Essex, Wivenhoe Park, Colchester CO4 3SQ; e-mail ashah@essex.ac.uk . This article was conceived while he was Visiting Assistant Professor at the College of Business, University of Maryland, USA. The author wishes to thank Dan Ostas, Lee Preston and Stephen Loeb for helpful comments on earlier drafts.     

Universal Moral Values for Corporate Codes of Ethics

How can one establish if a corporate code of ethics is ethical in terms of its content? One important first step might be the establishment of core universal moral values by which corporate codes of ethics can be ethically constructed and evaluated. Following a review of normative research on corporate codes of ethics, a set of universal moral values is generated by considering three sources: (1) corporate codes of ethics; (2) global codes of ethics; and (3) the business ethics literature. Based on the convergence of the three sources of standards, six universal moral values for corporate codes of ethics are proposed including: (1) trustworthiness; (2) respect; (3) responsibility; (4) fairness; (5) caring; and (6) citizenship. Relying on the proposed set of universal moral values, implications are discussed as to what the content of corporate codes of ethics should consist of. The paper concludes with its limitations.     

Corporate Governance and Ethics: A Feminist Perspective

The mainstream literature on corporate governance is based on the premise of conflicts of interest in a competitive game played by variously defined stakeholders and thus builds explicitly and/or implicitly on masculinist ethical theories. This article argues that insights from feminist ethics, and in particular ethics of care, can provide a different, yet relevant, lens through which to study corporate governance. Based on feminist ethical theories, the article conceptualises a governance model that is different from the current normative orthodoxy.     

An Inquiry into the Study of Corporate Codes of Ethics

This paper takes its point of departure in an article by Stevens [Stevens, B.: 1994, Journal of Business Ethics 54, 163–171], in which she identified a lack of knowledge regarding how corporate codes of ethics are communicated and affect behavior in organizations. Taking heed of this suggested gap, we review studies on corporate codes of ethics with an empirical content, published since 1994. The conclusion of the review is that we still lack knowledge on how codes work, how they are communicated and how they are transformed inside organizations. Stevens’ plea could even be extended, arguing that the knowledge gap might be of even more significance than in the mid-1990s. Some directions for how this situation can be approached in future studies are outlined in the paper.     

Corporate Ethics Codes: A Practical Application of Liability Prevention

With the great increase in litigation, insurance costs, and consumer prices, both managers and businesses should take a proactive position in avoiding liability. Legal liability may attach when a duty has been breached; many actions falling into this category are also considered unethical. Since much of business liability is caused by a breach of a duty by a business to either an individual, another business, or to society, this article asserts that the practice of liability prevention is a practical business application of ethics. In today's highly litigious environment, it is appropriate for the concept of general liability prevention to be included in corporate codes of ethics.     

Effective Corporate Codes of Ethics: Perceptions of Code Users

The study examines employee, managerial, and ethics officer perceptions regarding their companies codes of ethics. The study moves beyond examining the mere existence of a code of ethics to consider the role that code content and code process (i.e. creation, implementation, and administration) might play with respect to the effectiveness of codes in influencing behavior. Fifty-seven in-depth, semi-structured interviews of employees, managers, and ethics officers were conducted at four large Canadian companies. The factors viewed by respondents to be important with respect to code effectiveness include: provisions of examples; readability; tone; relevance; realism; senior management support; training; reinforcement; living up to standards; reporting requirement; anonymous phone line; communicating violations; and enforcement. The factors found to be potentially important include: justification for provisions; employee involvement; and sign-off requirements. Factors found not to be important include: objectives for the code; prior distribution; testing; and relating ones performance review to compliance with the code.     

The Nature of the Relationship between Corporate Codes of Ethics and Behaviour

A study was conducted in order to examine the relationship between corporate codes of ethics and behaviour. Fifty-seven interviews of employees, managers, and ethics officers were conducted at four large Canadian companies. The study found that codes of ethics are a potential factor influencing the behaviour of corporate agents. Reasons are provided why codes are violated as well as complied with. A set of eight metaphors are developed which help to explain how codes of ethics influence behaviour.     

Corporate Governance,Ethics, and the Backdating of Stock Options

Backdating of stock options is an example of an agency problem. It has emerged despite all the measures (i.e., new regulations and additional corporate governance mechanisms) aimed at addressing such problems? Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary. What ethical measures need to be taken to address the agency problem? What values and norms should guide the board of directors in protecting the shareholders’ interests? To examine these issues, we first discuss the role values and norms can play with respect to underlying corporate governance and the proper role of directors, such as transparency, accountability, integrity (which is reflected in proper mechanisms of checks and balances), and public responsibility. Second, we discuss various stakeholder approaches (e.g., government, directors, managers, and shareholders) by which conflicts of interest (i.e., the agency problem) can be addressed. Third, we assess the practice of backdating stock options, as an illustration of the agency problem, in terms of whether the practice is legally acceptable or ethically justifiable. Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism. We conclude that while executive compensation schemes (e.g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become “part of the problem,” and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values.     

Corporate Governance, Ethics, and the Backdating of Stock Options

Backdating of stock options is an example of an agency problem. It has emerged despite all the measures (i.e., new regulations and additional corporate governance mechanisms) aimed at addressing such problems? Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary. What ethical measures need to be taken to address the agency problem? What values and norms should guide the board of directors in protecting the shareholders’ interests? To examine these issues, we first discuss the role values and norms can play with respect to underlying corporate governance and the proper role of directors, such as transparency, accountability, integrity (which is reflected in proper mechanisms of checks and balances), and public responsibility. Second, we discuss various stakeholder approaches (e.g., government, directors, managers, and shareholders) by which conflicts of interest (i.e., the agency problem) can be addressed. Third, we assess the practice of backdating stock options, as an illustration of the agency problem, in terms of whether the practice is legally acceptable or ethically justifiable. Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism. We conclude that while executive compensation schemes (e.g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become “part of the problem,” and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values.     

商业伦理的构建——公司治理的一个视角

在经济飞速发展的今天,商业伦理正越来越受到高度重视。商业伦理本身并不具有法律意义上的强制性,但它具有道德意义上的导向性和自我约束性,是一个企业乃至一个商业社会和谐、长远发展的基石。同时,商业伦理也是人们在追求商业利益过程中应当遵循的道德原则。     

Determinants of the Effectiveness of Corporate Codes of Ethics: An Empirical Study

Recent figures reported by KPMG confirm the growing prevalence of corporate codes of ethics globally. Svensson et al. (Bus Ethics 18:389–407, 2009) in surveys of the largest corporations in Australia, Canada, and Sweden found a similar trend. The increased prevalence of corporate codes of ethics has been accompanied by heightened research interest in various aspects of these documents, e.g., the contents and focus of the codes. However, there is a paucity of research examining the effectiveness of these documents and the organizational infrastructure that accompany them. This study, based on a survey of Canada’s largest corporations, sought to empirically assess the determinants of the effectiveness of corporate codes of ethics by regressing managers’ perceptions of code effectiveness against various elements of ethics programs. It was found that, in a statistically significant model, eighteen independent variables explain 58.5% of the variance in the perceived effectiveness of corporate codes of ethics.     

Corporate Codes of Ethics,National Culture,and Earnings Discretion: International Evidence

This study examines the role of codes of ethics in reducing the extent to which managers act opportunistically in reporting earnings. Corporate codes of ethics, by clarifying the boundaries of ethical corporate behaviors and making relevant social norms more salient, have the potential to deter managers from engaging in opportunistic financial reporting practices. In a sample of international companies, we find that the quality of corporate codes of ethics is associated with higher earnings quality, i.e., lower discretionary accruals. Our results are confirmed for a subsample of firms more likely to be engaging in opportunistic reporting behavior, i.e., firms that just meet or beat analysts’ forecasts. Further, codes of ethics play a greater role in reducing earnings management for firms in countries with weaker investor protection mechanisms. Our results suggest that corporate codes of ethics can be a viable alternative to country-level investor protection mechanisms in curbing aggressive reporting behaviors.     

Opening the Black Box: Corporate Codes of Ethics in Their Organizational Context

A review of the literature on Corporate Codes of Ethics suggests that whilst there exists an informative body of literature concerning the prevalence of such codes, their design, implementation and promulgation, it is also evident that there is a relative lack of consideration of their impact upon members' everyday organizational behaviour. By drawing upon organizational sociology and psychology this paper constructs a contextualist and interpretive model which seeks to enable an analysis and evaluation of their effects upon individual, group and organizational behaviour.     

Monitoring Costs,Managerial Ethics and Corporate Governance: A Modeling Approach

This article evaluates effectiveness and costs of external regulation, in particular the Sarbanes–Oxley Act of 2002 (SOX) in restricting managerial malfeasance and safeguarding shareholder interests. It discusses the role of managerial ethics as an alternative corporate governance mechanism to protect shareholder value. This article builds a mathematical model to illustrate shareholders’ choices of best corporate governance mechanisms, taking into account the influence of managerial ethics, effectiveness and costs of monitoring. We suggest that the best corporate governance design and the optimal monitoring expenses are influenced by managerial types, monitoring efficiency, and effectiveness of ethics education. We conclude that stringent regulation and monitoring may not always enhance shareholder value. When managerial ethics could be improved by ethics education or social norms, ethics education may be a better alternative than stringent regulation.     

Ethics Audits and Corporate Governance: The Case of Public Sector Sports Organizations

This article presents a theorized and conceptually informed method for the undertaking of an ethics audit organization. At an operational level, the overall integrity of an organization, it is argued, may be evaluated through the application of a conceptual framework that embraces the inter-related themes of individual responsibility, social equity and political responsibility. Finally, a method is presented for ethics audit which was developed in the auditing of a national public sector sports organization: sportscotland. This emphasizes the significance of key personnel (individuals and in groups) in producing and reproducing the organizational ethos, whilst recognizing the importance of anonymity and confidentiality throughout the process. The theoretical terrain of the ethics audit is articulated through a consideration of ethics as applied moral philosophy, equity as social justice and corporate governance as the moral health (or otherwise) of a public sector sports organization.     

优化公司治理结构 提高公司治理效率

公司治理结构是公司的核心制度,建立良好的治理结构可以提供有效的监督,从而激励公司更有效地利用资源,保证公司高效运行和良性循环,提高公司治理效率。通过分析公司治理结构构成的股权结构、资本结构和委托代理三要素与公司治理效率的相互影响、互为因果关系,并从三要素详细阐述了如何最大程度降低公司治理成本,同时获得最大的公司治理收益,进而保护股东、债权人和其他利益相关者的利益,以实现公司的高效运行和可持续发展。     

Codes,Ethics and Cross-Cultural Differences: Stories from the Implementation of a Corporate Code of Ethics in a MNC Subsidiary

In this article, we focus on the cross- cultural aspects of the implementation of an American company’s code of ethics into its Swedish subsidiary. We identify the cross-cultural stories that the receivers in the subsidiary use when trying to explain the parent’s code and conceptualize these stories as part of an emerging narrative of national belonging and differences. The receivers resisted the code by amplifying the importance of national identity. Rather than stimulating a discussion on ethics that might have strengthened the ties between the parent and the subsidiary, the outcome of the code implementation had the opposite effect. The article concludes by stressing the process of implementing codes across cultures rather than code content.     

Ethics Programs, Board Involvement, and Potential Conflicts of Interest in Corporate Governance

Board composition, insider participation on compensation committees, and director compensation practices can potentially cause conflicts of interest between directors and shareholders. If these corporate governance structures result in situations where actions beneficial to directors do not also benefit shareholders, then shareholders may suffer.Corporate ethics programs usually address conflicts of interest that may arise in the firm's activities. Some boards of directors take active roles in their firms' ethics programs by actively overseeing the programs. This paper empirically examines the relationship between ethics programs and potential conflicts of interest and the relationship between board involvement in a firm's ethics program and potential conflicts of interest.Evidence in this paper shows that firms with ethics programs have a lower percentage of inside directors on their compensation committees than do firms without ethics programs. Firms in which boards are actively involved in the programs have more independent boards (higher percentage of independent directors and lower percentage of inside directors) and are more likely to compensate outside directors with equity than are firms in which boards are not actively involved in the programs. Supplemental analyses show that the incidence of potential conflicts of interest is not significantly different between firms without ethics programs and firms in which boards are not actively involved in the programs. Taken together, the evidence in this paper indicates that a board actively involved in an ethics program, and not the simple existence of an ethics program, is related to the incidence of potential conflicts of interest.     

The Cultural Dimension of Codes of Corporate Governance: A Focus on the Olivencia Report

The article deals with the sociocultural and historical background of the Olivencia Report and relates this to the document's content, particularly, to its recommendations for Spanish Boards. A discussion of the distinctively Spanish understandings of loyalty, due diligence and transparency is included. The work ends with insights into parallelisms between corporate governance and political government, specifically on the role of culture, democratic representation and accountability, the distribution of power, the protection of property rights and equality.